As most of you know, we are Warren Buffett disciples. CNBC had a short video listing Buffett's shortlist of investing rules. We have written extensively about these rules in past client memos, but we thought a refresher was in order:

Don't buy or sell based on current headlines. Many investors make decisions based on the most recent past or near future. We plan to hold our investments for 5-10 years, so we're more interested in how the business looks in 5 years, compared to extrapolating the recent past. In fact, short-term problems generally present an entry point.

Don't try to profit from bubbles, just avoid them. Investors get enamored with what has worked recently. An asset increases in value and pretty soon it's a self-fulfilling prophecy. Investors forget about the underlying asset, what is produces, and its intrinsic value. Example today: fixed income

Eliminate/mitigate emotional behavior when investing. The Dow went from 11 at the turn of the 20th century to 11,000 at the end of the century, an incredible 10-11% annual return (including dividends). However, many investors had a negative experience investing in the stock market because investment decisions were emotional. Don't try to "time the market." Peter Lynch once said, "More money has been lost in market timing than all the corrections combined."

Don't bet against America. The country will and does have issues (Civil War, Great Depression, WWI & II, 9/11, Financial Crisis, current political madness), but our system works and has overcome every past obstacle.

We initiated a position in Monsanto (NYSE: MON) in March of this year when the shares traded below $85. Our intrinsic value was $120, giving us an adequate margin of safety (price-to-value of .70x). Later in the spring, German pharma and ag company, Bayer, made an unsolicited offer of $122/share. Bayer upped the offer slightly over the last few months and finally yesterday, MON and Bayer came to an agreement at $128/share.

We added to our position yesterday with the shares trading around $107, offering nearly 20% upside to the $128/share offer. Here's our logic in adding to the position: We still think MON is worth $120/share, absent a deal. Bayer offered to pay a $2 billion ($4.60/share) breakup fee if the deal doesn't pass antitrust. The deal is expected to close at the end of 2017, so we expect another $2.70/share in dividends over the next five quarters. We think the downside value is $89, the price of MON shares before the Bayer offer.